The creditworthiness of independent law schools that aren’t affiliated with larger universities is deteriorating as enrollment declines, Standard & Poor’s said in a report.
Standalone laws schools “are more susceptible to credit deterioration than law schools that are nested within comprehensive universities,” S&P, a division of McGraw-Hill Financial Inc. (MHFI:US), said in the report released yesterday.
Credit quality will probably diverge between the most and least selective schools as the weak job market since 2009 depresses enrollment nationwide, the ratings firm said. It identified five accredited law schools that are independent of larger universities: Albany Law School, Brooklyn Law School, New York Law School, Thomas Jefferson School of Law (78527MF:US) and Thomas M. Cooley Law School.
“Independent law schools have a unique situation,” Anthony Crowell, the dean of New York Law School for the past 18 months, said in a phone interview today. He said steps his school is taking, such as an operational review and a strategic plan focusing on academics, “are validated by this report.”
Law schools other than the five independents typically are incorporated into larger universities, so their finances can’t be analyzed for the purposes of credit markets, S&P lead analyst Robert Dobbins said. S&P began working on the report because law schools historically contributed to universities’ financial health, he said.
“Law schools became more of a topic because of the weakness in demand,” he said. “Profitability was no longer at historic levels and we thought it was important to speak to this.”
Brooklyn Law, New York Law, Thomas Cooley and Thomas Jefferson have negative outlooks, S&P said. Albany, with a BBB rating, was listed as stable.
David Singer, an Albany spokesman, declined to comment on the report. Representatives of Thomas Jefferson and Thomas Cooley didn’t respond to e-mails seeking comment.
“There isn’t a law school in the country that isn’t taking a hard look at the new world of law,” Nicholas Allard, Brooklyn Law’s dean, said in a phone interview today.
Brooklyn Law School is “in a sound position,” he said. “We’ve cut costs and have monetized some real estate assets that we don’t need.”
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